IMF chief: Investing forex reserves in state projects a mistake
Mumbai: Rodrigo de Rato, Managing Director, International Monetary Fund, has cautioned that tapping the country's foreign exchange reserves to fund infrastructure projects would be a mistake.

Addressing bankers and other delegates at a meeting organised by the Reserve Bank of India on Thursday, Rato said, a country should not be using resources of the central bank for investment in the State projects. "That would be a mistake," he said. There have been suggestions from different quarters on the Government using the forex reserves for infrastructure development.

Speaking on the topic `India-prospering in a globalised economy', Rato said that the country needs to put its public finances on a solid footing. The Government's ability to finance large deficits domestically with apparent ease may have reduced the sense of urgency to make the difficult choices necessary to turn the fiscal situation around. But large deficits have had a major, if almost silent cost, he said.

Interest payments, wages and subsidies take up nearly half of all the Central Government spending leaving a little room for the much needed public investment and basic social services, he said.

India's large infrastructure gap acts as an important constraint on growth. By creating space for high priority spending, fiscal reforms can have a major impact on economic growth. Lower fiscal deficits will improve financial intermediation, he added.

India's banks currently hold around one third of their assets in the form of Government securities, compared with eight per cent in Singapore and 15 per cent in Thailand.

Rato said that India needs to continue to restructure its domestic economy to allow it to reap the full benefits of globalisation. The country needs to generate in excess of 100 million jobs in the next decade simply to keep the unemployment rate from rising.
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Cabinet approves SAARC pact on customs
New Delhi: The Union Cabinet has given its approval for signing the SAARC Agreement on Mutual Administrative Assistance in customs matters.

An official release said that this agreement would help in obtaining reliable, quick and cost-effective information and intelligence on a multilateral basis for the prevention and investigation of customs offences in the SAARC region.
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Govt. to rework Fringe Benefit tax
New Delhi: Industry and Finance Ministry officials met yesterday to discuss budget proposals including the Fringe Benefit Tax (FBT). It would appear that the only assurance industry representatives got was that FBT may be redesigned but it will not be removed.

"The government is very positive. It's open for discussion and working together," said Rajeev Kumar, chief economist, CII.

Employees, chambers of the businesses feel legitimate business expenses should not be taxed.
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Chidambaram: Some 'good news' on Banking Cash Transaction tax
New Delhi: The Finance Minister, P. Chidambaram, has hinted at a softening of the Budget proposal to impose 0.1 per cent tax on bank cash withdrawals of Rs10,000 and more in a single day.

"The tax (Banking Cash Transaction Tax) is not being imposed. It is being proposed. I assure you that there would be some good news on this," he said in his reply to the debate on the Budget in the Lok Sabha.

The Minister, however, refused to get drawn into the specifics of amendments to the tax proposal and said details would be provided during the debate on the Finance Bill.

Reeling out figures on the growth in investment activity after the UPA Government took office last year, Chidambaram said if the momentum continues, the coming fiscal might see a 7-per cent growth. "There has been a sharp spurt in investment after many, many years. We are on a rising curve of investment. If this continues, 2005-06 promises to be another good year, and the UPA Government would deliver another year of growth of over 7 per cent," he said.
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Advance tax collections dip
Mumbai: Advance tax filings by the top 100 companies in March have failed to keep pace with last year's figures and are seven per cent lower than the figures for March 2004.

While collections for the entire year may have gone up by ten per cent over the previous year, it is still below the average annual growth of 15 to 20 per cent. Manufacturing and insurance companies like Life Insurance Corporation are leading the tax collections.

Among the manufacturing pack, Tata Steel has filed taxes worth Rs395 crore for the fourth quarter, Hindalco Rs235 crore, Reliance Rs157 crore, Grasim Rs135 crore and Gujarat Ambuja Rs10 crore.

The worst performers have been the oil companies and banks where filings have fallen by almost 30 per cent. Among the oil marketing companies, HPCL has filed only Rs62 crore of tax collections due to the subsidy burden and high oil prices.

In the banking segment, State Bank of India has filed only Rs558 crore as opposed to Rs680 crore last year because of high interest rates and falling treasury profits.
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Social security scheme for govt. employees
New Delhi: The government has announced a scheme to provide social security to eight million employees insured under Employees State Insurance Corporation (ESIC) and their families.

The insured workers, who lose employment after having contributed to the ESI scheme for five or more years, shall be entitled to an 'Unemployment Allowance' in cash. This would be equivalent to about 50 per cent of their wages, for a maximum period of six months.

Labour Minister K Chandra Sekhar Rao informed the Lok Sabha members about the ambitious Rajiv Gandhi Shramik Kalyan Yojana. The scheme will come into force from April 1 this year.

Insured persons covered by ESIC and losing employment after April 1, 2005 on account of closure of factories or establishments, retrenchment or permanent invalidity shall be covered under this scheme.
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Exim Bank: Textile exports may breach $70 bn mark by 2014
Mumbai: According to the Exim Bank's latest study titled `Textile exports: Post-MFA scenario - Opportunities and challenges' the Indian textile industry has the potential to breach the $70-billion mark in exports by 2014.

Following the phasing out of quotas this year, the clothing sector would offer higher gains than the textile sector, said the report. China, India, Pakistan, Taiwan, Hong Kong, Brazil, Indonesia, Turkey and Egypt would emerge as "winners". However, in the long-term sustaining market shares would depend on cost, quality, and timely delivery by market players, the report cautioned.

In the short term (one-two years), the apparel market in the US and the European Union would provide opportunities to developing nations. The labour intensiveness of garment manufacturing would enhance potential gains for developing countries such as India.

In the long term (by 2014), the textile sector would offer opportunities as many high cost countries would lose their competitive position in the open trading environment. Besides, the study observed, in the long term, the intra-EU trade would be reduced, providing additional opportunities for developing countries such as India.

The study estimated that India could increase its share in the textiles markets of the US and the EU from 8.4 per cent ($1.5 billion) and 3.2 per cent ($1.9 billion) currently to a share of 13.5 per cent ($5 billion) and 8 per cent ($8 billion) respectively by 2014.

Similarly, India could increase its share in the garments market of the US and the EU from the present level of 3.2 per cent ($2.3 billion) and 3 per cent ($3 billion), respectively to a share of 8 per cent each ($13 billion and $16 billion, respectively) by 2014.

These two markets would account for a total market of $42 billion for Indian textiles and garments by 2014, according to the study.
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